Income Tax Appellate Tribunal - Delhi
Acit, New Delhi vs M/S Minda Industries Ltd., New Delhi on 27 April, 2018
ITA No. 4297 to 4300/D/2015,
4455, 4456/D/2015
AY 2009-10 to 2012-13
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: 'E' NEW DELHI
BEFORE SHRI G.D. AGRAWAL, HON'BLE PRESIDENT
AND
SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER
ITA No. 4297/Del /2015
Assessment Year: 2009-10
ITA No. 4298/Del /2015
Assessment Year: 2010-11
ITA No. 4299/Del /2015
Assessment Year: 2011-12
ITA No. 4300/Del /2015
Assessment Year: 2012-13
Minda Industries Ltd., DCIT,
B-64/1, Wazirpur Industrial Area, Central Circle 3,
Delhi-110052 vs New Delhi.
(PAN: AAACM1152C)
(Appellant) (Respondent)
ITA No. 4455/Del /2015
Assessment Year: 2009-10
ITA No. 4456/Del /2015
Assessment Year: 2010-11
DCIT, Minda Industries Ltd.,
Central Circle 13, B-94/1, Wazirpur Industrial Area,
vs
New Delhi. Delhi-110052
(Appellant) (Respondent)
Assessee by : Shri Pradeep Dinodia, CA
Shri R.K. Kapoor, CA
Respondent by : Ms Shefali Swaroop, CIT DR
Date of Hearing: 31.01.2018
Date of Pronouncement: 27.04.2018
pg. 1
ITA No. 4297 to 4300/D/2015,
4455, 4456/D/2015
AY 2009-10 to 2012-13
ORDER
PER BENCH:
These six appeals have been preferred against the separate orders dated 24.04.2015 of the Ld. CIT (Appeals)-25, New Delhi and pertain to assessment years 2009-10 to 2012-13. ITA numbers 4297, 4298, 4299 and 4300 are the assessee's appeals for assessment years 2009 - 10, 2010 - 11, 2011 - 12 and 2012 - 13 respectively whereas ITA numbers 4455 and 4456 are the Department's appeals for assessment years 2009 - 10 and 2010 - 11 respectively. All these appeals emanate from assessment proceedings subsequent to a search and seizure action u/s 132 (1) of the Income Tax Act, 1961 on 10.01.2012 at the residential premises of the Minda Group. All these appeals were heard together and are being disposed of by this consolidated order for the sake of convenience.
1.1 The four assessment years under appeal are now being taken up one by one.
2. Assessment Year 2009-10: ITA No. 4297/DEL/15 is assessee's appeal relating to assessment year 2009 - 10. Ground numbers 1 to 5 in this appeal are against the treating of sales tax pg. 2 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 subsidy of Rs. 41,15,604/- as revenue receipt. This appeal is consequent to search made under section 153A read with section 143 (3) of the Income Tax Act. It has been submitted by the Ld. authorised representative that this issue had earlier been decided in favour of the assessee in ITA No. 4006/DEL/13 by following the earlier order of the ITAT in assessee's own case for assessment years 2007 - 08 and 2008-09 as well as assessment year 2009 - 10. It has also been submitted that this additions is identical to the one which had been made by the assessing officer in the earlier assessment order passed under section 143 (3) of the Income Tax Act, 1961 (hereinafter called "the Act") and which had been examined and adjudicated upon by the ITAT in an earlier appeal filed by the assessee against the original assessment order prior to search in ITA No. 3260/DEL/13. It has been submitted that the addition made under section 153A was identical and the same as was made in the original assessment order which was passed at an earlier date for this assessment year. It was submitted that the issue in dispute is fully covered in favour of the assessee by virtue of the earlier order of the ITAT. It was also submitted that no incriminating material was found during the course of search with respect to this addition.
pg. 3 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 2.1 With respect to ground numbers 6 and 7 it was submitted that they pertain to disallowance of Rs. 6,500,288/- paid for feasibility study and a similar addition had been adjudicated earlier in favour of the assessee by the ITAT in assessee's own case. It was submitted that the issue in dispute is fully covered in favour of the assessee by virtue of the earlier order of the ITAT.
3. In response, the Ld. CIT DR placed extensive reliance on the concurrent findings of both the lower authorities and submitted that the additions/disallowances deserve to be upheld.
4. With reference to the Department's appeal bearing ITA No. 4455/DEL/15, the Ld. authorised representative submitted that the issue being challenged by the Department pertains to the deletion of disallowance under section 14A of the Act read with Rule 8D of the Income Tax Rules, 1962. It was submitted that this issue is also covered in favour of the assessee vide Para 7 of the earlier order of the ITAT for assessment year 2009 - 10 wherein it had been held that no disallowance under section 14A could be made when no dividend income was earned. It was prayed that the Department's appeal in this regard be dismissed.
pg. 4 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13
5. In response, the Ld. CIT DR supported the findings of the assessing officer and submitted that the Ld. CIT (Appeals) had erred in deleting the disallowance.
6. We have heard the rival submissions and have perused the material on record. As far as the assessee's appeal is concerned, it is seen that the issue of sales tax subsidy is covered in favour of the assessee by order of ITAT in assessee's own favour in earlier assessment years 2007 - 08 and 2008 - 09. This issue also came up in assessment year 2009 - 10 and the same was decided in favour of the assessee in assessment year 2009 - 10 in ITA No. 3260/DEL/13 wherein in paragraph 4 of the said order the coordinate bench of the Tribunal noted that the Tribunal had considered the very same issue of taxability of sales tax subsidy received and adjudicated the same in favour of the assessee in assessment years 2007 - 08 and 2008 - 09 vide orders of the ITAT in ITA number 1506/DEL/2011 and ITA No. 1715/DEL/2011. We also note that this addition has been made without there being any incriminating material found in respect of this addition during the course of search conducted on the premises of the assessee. Accordingly, respectfully following the pg. 5 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 earlier orders of the Tribunal in the assessee's own case as aforementioned we allow these grounds raised by the assessee. 6.1 As far as the issue of disallowance of professional charges paid for feasibility study is concerned, it is seen that no new fact or incriminating material was unearthed during the course of search with respect to this issue and no new material fact has been brought on record even during the course of proceedings before us. We find that this issue has been earlier settled in favour of the assessee in assessee's appeal for assessment year 2009 - 10 in the original assessment proceedings wherein it had been held that the expenditure on feasibility study pertained to expansion of business by way of acquisition. The Tribunal had noted that no new asset had come into existence nor any benefit of enduring nature had resulted for the assessee company and, therefore, the expenditure incurred on feasibility study was to be allowed as revenue expenditure. As nothing new has been brought on record by the Department subsequent to the earlier order of the ITAT and nothing new or incriminating was found during the course of search, we hold that the expenditure incurred on feasibility study is to be allowed as revenue pg. 6 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 expenditure and accordingly we allow the grounds raised by the assessee in this regard.
7. Coming to the Department's appeal, the sole issue is regarding the disallowance of Rs. 38,75,071/- under section 14A of the Act. The Department has disputed the action of the Ld. CIT (Appeals) in deleting this disallowance. In this regard also the issue has to be necessarily decided in favour of the assessee as the ITAT in its earlier order for assessment year 2009 - 10 had recorded a finding that, admittedly, the assessee had not earned any dividend income during the year under consideration and, therefore, no disallowance under section 14A of the Act could be made. It is seen that with respect to this disallowance also nothing incriminating was found during the course of search and, therefore, in absence of any evidence to the contrary being demonstrated by the Department, since the assessee has not earned any dividend income during the year under consideration, we find no reason to interfere with the findings of the Ld. CIT (Appeals) in this regard and we deem it fit dismiss the grounds raised by the Department.
pg. 7 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13
8. In the result the appeal of the assessee bearing ITA No. 4297/DEL/2015 has allowed whereas the Department's appeal bearing ITA No. 4455/DEN/2015 is dismissed.
9. Assessment Year 2010-11: In this year the assessee's appeal bearing ITA No. 4298/Del/2015 raises the sole issue of confirmation of ad hoc disallowance to the extent of 5% of the total foreign travelling expenses by the Ld. CIT (Appeals). Ground No. 1 of the Department's appeal in ITA No. 4456/Del/2015 is the cross ground of appeal by the Department on this issue. The facts pertaining to this issue are that the assessing officer had disallowed 10% out of the total foreign travelling expenses on the presumption that some of the foreign travelling would have been undertaken for new tie-ups. The Ld. authorised representative submitted that similar disallowance was made in the case of the assessee in assessment years 2007 - 08, 2008 - 09 and 2009 - 10 and the Ld. CIT (Appeals) had, in the original assessment/appellate proceedings, allowed relief to the assessee. Subsequently, the Department had preferred an appeal against the adjudication by the Ld. CIT (Appeals) before the ITAT and the ITAT in assessee's own case for assessment year 2009 - 10 in ITA No. 3260/Del/2013, following ITAT's earlier orders in assessee's pg. 8 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 own case for assessment years 2007-08 and 2008-2009, had decided the issue in favour of the assessee. The Ld. authorised representative submitted that no new fact or any incriminating material was found with respect to foreign travelling expenses during the course of search and, therefore, this addition did not have any feet stand on.
10. In response, the Ld. CIT DR submitted that the Ld. CIT (Appeals) had erred in restricting the disallowance to 5% and it was vehemently argued that the disallowance should be restored to 10% of the total expenditure on foreign travelling.
11. Coming to ground No. 2 raised by the Department, the Ld. authorised representative submitted that this ground challenges the deletion of Rs. 45,89,679/- out of the total addition of Rs. 66,62,690/- made by the AO for the first time in the order passed under section 153A of the Act. The Ld. authorised representative submitted that during the course of search, certain documents pertaining to scrap sale were seized. These documents indicated that the assessee was billing the scrap at rates lower than the rates at which the scrap was actually being sold. The AO made addition by extrapolating these transactions for the remaining period of the year. On the assessee approaching the Ld. first pg. 9 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 appellate authority, the Ld. CIT (Appeals) allowed the impugned relief by coming to the conclusion that extrapolation of the figures by Rs. 45,89,679/- was not warranted and further that the addition had been made on conjectures and surmises and, therefore, needed to be restricted to the extent of incriminating documents found during the course of the search. The Ld. authorised representative vehemently argued that the Ld. CIT (Appeals) had properly applied the law on this issue and submitted that the Department's ground deserved to be dismissed.
12. In response, the Ld. CIT DR vehemently supported the findings of the assessing officer in this regard and submitted that the Ld. CIT (Appeals) had erred in allowing this relief to the assessee.
13. We have heard the rival submissions and have also perused the material on record. As far as the issue of ad hoc disallowance in respect of foreign travel is concerned, it is seen that no incriminating material has been brought on record in respect of this item of expenditure and this issue has already been settled in favour of the assessee by earlier orders of the ITAT in assessment years 2007-08, 2008-09 as well as 2009-10.
pg. 10 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 Consistent with the view taken in earlier orders of the ITAT, the ground raised by the assessee is allowed whereas the corresponding ground taken in the cross appeal by the Department is dismissed.
14. Coming to the issue of deletion of addition by the Ld. CIT (Appeals) in respect of the scrap sales which has been challenged by the Department, it is seen that the Ld. CIT (Appeals) has accepted the assessee's contention that the impugned addition had been made by the assessing officer on an estimate and that the same was not based on any evidence that was found during the course of search proceedings. While allowing the relief, the Ld. CIT (Appeals) has also accepted the assessee's reliance on the judgment of the Hon'ble Delhi High Court in the case of Kulwant Rai reported in 291 ITR 36 (DEL). Although the Ld. CIT DR has contested the deletion of addition by the Ld. CIT (Appeals), she could not point out any legal infirmity or factual infirmity on this adjudication by the Ld. CIT (Appeals). The Department also could not point out any judgment to the contrary and in favour of the Department in this regard. It is settled law that there is no scope for extrapolation in assessment framed under section 153A of the Act and the additions can be made only with reference to pg. 11 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 incriminating material found during the course of search. This view supported by another judgment of the Hon'ble Delhi High Court in the case of Principal CIT versus Smt. Anita Rani reported in 392 ITR 501 (Delhi). Another judgment of the jurisdictional High Court to the point is Principal CIT versus Kurele Paper Mills (Private) Limited reported in 380 ITR 571 (Delhi). Therefore, in view of the finding of fact by the Ld. CIT (Appeals) that incriminating material found in respect of the scrap sales amounted to Rs. 20,73,211/- only and further in view of the judgments of the Hon'ble Delhi High Court as aforementioned, we find no reason to interfere with the findings of the Ld. CIT (Appeals) on this issue and we, accordingly, dismiss ground No. 2 of the Department's appeal.
15. In the result assessee's appeal bearing ITA No. 4298/DEL/2015 is allowed whereas Department's appeal bearing ITA No. 4456/DEL/ 2015 is dismissed.
16. Assessment Years 2011-12 and 2012-13 : In both these years, the assessee has agitated only one ground of appeal and it pertains to ad hoc disallowance out of foreign travelling expenses. It is undisputed that no incriminating material was found during the course of search in respect of foreign travelling expenses. This pg. 12 ITA No. 4297 to 4300/D/2015, 4455, 4456/D/2015 AY 2009-10 to 2012-13 issue has already been settled in favour of the assessee by earlier orders of the ITAT in assessment years 2007 - 08, 2008 - 09 as well as 2009-10 and 2010-11. Consistent with the view taken in earlier orders this ground raised by the assessee is allowed for both the years under consideration.
17. In the result appeals in ITA numbers 4299/DEL/2015 and 4300/DEL/2015 are allowed.
18. In the final result all the four appeals of the assessee are allowed whereas both the appeals of the Department are dismissed.
Order pronounced in the Open Court on 27th April, 2018.
Sd/- Sd/-
(G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA)
PRESIDENT JUDICIAL MEMBER
DT. 27th APRIL 2018
'GS'
Copy forwarded to:-
1. Appellant
2. Respondent
3. CIT(A)
4. CIT
5. DR
By Order
Asstt. Registrar
pg. 13